Over Rs16bn revenue loss prevented by busting gangs of cyber criminals using foreign IPs/VPN/proxy servers

ISLAMABAD: Directorate General of Intelligence and Investigation-Inland Revenue (IR) has prevented revenue loss of over Rs 16 billion by busting gangs/fraudsters using foreign IPs/VPN/Proxy Servers and “VPN/USA based” computer servers for declaring fake carry forward input tax.

The directorate has strongly recommended the Federal Board of Revenue (FBR) that in order to preempt fraudulent attempts in future it is recommended that system controls and checks may immediately be placed on taking fake tax credit in Brought Forward (BF) and Carry Forward (CF) columns of returns and checks on return filing system to block access on “IRIS” through Proxy/foreign based servers and VPN, as has been done on customs system of Goods Decelerations and Clearance under PSW and WeBOC.

Details of the case revealed that the Directorate of I&I-IR, Karachi has detected a unique scam within a few days of execution by fraudsters. In this case foreign IPs/VPN/Proxy Server have been used by unscrupulous elements to mask their identity and hide domestic location. During last one year many gangs have been busted and a number of culprits arrested from different cities of the country on the basis of local IP address location, however, this time to hoodwink tax authorities, fraudsters used “VPN/USA based” computer servers located in “Dallas, Texas” and “New Jersey” to access FBR’s e-filing system. During short period of sixteen days (June 13-29, 2024) and particularly immediately after announcement of Federal Budget on 12.6.2024, Waqar Enterprises (Importer and Distributor) registered with the Regional Tax Office-II, Karachi injected fake input of Rs 3,085 million of Coal Sector (HS Code 2701), parked through revised sales tax returns of three previous months (Jan, Feb & March-2024,) and by declaring fake carry forward input tax. The above layering and parking of fake input tax was apparently made to avoid applicability of new tax measures on coal sector i.e. withholding tax.

In a case falling under jurisdiction of RTO-II Karachi, the registered person has blatantly breached IRIS return filing system by taking fake tax credit in brought forward (B/F) and carry forward (C/F) columns of returns. As per system controls, C/F amount is automatically uploaded/accounted for in next month return from previous tax period, whereas in the instant case heavy B/F amounts of tax credit declared in returns without having the same corresponding C/F input tax.

The said fraudulent method has not only raised serious question mark on IRIS system controls but resulted into uploading of fake output/input tax in system as had previously been done by fraudsters through uploading of “fake Credit Notes” fake “Annex-C” and “Negative input tax” which was detected and prevented by DG I&I-IR.

In some other cases similar fraudulent activity has been detected involving total revenue loss so far detected as Rs 16,000 million out of which substantial amount has been blocked by timely action of DG I&I-IR and further efforts are in hand to prevent fake input tax from reaching to end users.

Copyright Business Recorder, 2024